On September 24, 2020 The Insurance Regulatory and Development Authority of India(IRDAI) has identified Life Insurance Corporation of India(LIC), General Insurance Corporation of India(GIC) and The New India Assurance Co. Ltd.(New India Assurance) as Domestic Systemically Important Insurers (D-SIIs) for 2020-21.
Note– IRDAI annually identifies D-SIIs and publishes the names of these insurers for public information.
Points to be Noted
i.IRDAI stated that these companies will be subject to enhanced standards of regulatory supervision.
ii.These insurers are asked to carry out the following in view of the nature of their operations and the systemic significance of D-SIIs:
- Elevate the level of corporate governance.
- Identify all associated risks and promote a sound risk management culture.
Gist about Domestic Systemically Important Insurers (D-SIIs)
i.D-SIIs refers to insurers of such size, market importance, & domestic and global interconnectedness whose failure or distress will cause a significant dislocation in the domestic financial system.
ii.It is to be noted that the continued functioning of D-SIIs is important for the uninterrupted availability of insurance services to the national economy.
i.It is perceived as insurers that are ‘Too Big(or too important)To Fail’ (TBTF).
ii.This perception and perceived expectation of government support may increase taking of risk, reduce market discipline, create competitive distortions and increase the likelihood of future distress.
iii.In order to deal with the systemic risks and moral hazard issues, these considerations require that D-SIIs be subjected to additional regulatory measures.
i.IRDAI has developed a methodology to identify and supervise the D-SIIs in order to identify such insurers and place them to enhanced monitoring mechanism.
ii.As per the methodology for identification of D-SIIs, the parameters include, the size of the operations in total revenue terms, including premium underwritten and the value of assets under management and global activities in more than one jurisdiction among others.
Formation of D-SIIs
- The formation of a committee on D-SIIs was announced in January 2019.
- The committee was constituted in the backdrop of the International Association of Insurance Supervisors (IAIS) calling all member countries to have a regulatory framework to deal with Domestic-SIIs.
Recent Related News:
i.On July 10, 2020, Insurance Regulatory and Development Authority of India (IRDAI) made it mandatory for all general and health insurers to launch short-term standard health policies for coronavirus disease (Covid-19) viz. Corona Kavach and Corona Rakshak, due to rapid increase in COVID-19 cases in India. Notably, the premium under both the products shall be the pan-India basis and no geographic location or zone-based pricing will be allowed.
ii.The Insurance Regulatory and Development Authority of India (IRDAI) has allowed all general and health insurance companies to increase the sum insured on the Standard Individual Health Insurance Product namely “Arogya Sanjeevani” beyond Rs 5 lakh.
About Insurance Regulatory and Development Authority of India(IRDAI):
Headquarters– Hyderabad, Telangana
Chairman– Dr. Subhash C. Khuntia
About Life Insurance Corporation of India(LIC):
Headquarters– Mumbai, Maharashtra
Chairman– M R Kumar